WestLB has exited from the Tricon Forfaiting Fund to be replaced as advisor, although not investor, by Standard Bank Plc (London).

Tricon Trade Management Limited (Bermuda) has spent months negotiating with Standard and has reached agreement for the bank to be investment advisor and documentation agent to the Standard Bank-Tricon class C shares and class D shares for Islamic Trade & Commodity Finance of the Tricon Forfaiting Fund Limited, the world’s only forfaiting fund.

Launched during 2003 with a consistently profitable track record, the class C shares and class D shares for Islamic Trade & Commodity Finance are unique investment offerings in both the trade finance and Islamic investment markets.

Standard Bank will supply research, risk analysis and market intelligence for the fund. The Standard Bank group has 22 global offices offering international investment banking services, with an excellent record in import/export finance and structured trade finance.

Its principal international operating subsidiaries are Standard Bank Plc in London, Standard Bank Asia in Hongkong, Standard Americas in New York and private banking entities within the Standard Bank Offshore Group.

John O ‘Mulloy at Standard Bank says: “The trade finance market needs every source of liquidity available. We therefore approached Tricon to help them sustain and grow the investor base and transaction volume they have developed. They have been successful and we hope the market will recognise the potential of the fund in its partnership with Standard Bank.”

WestLB is refocusing much of its global business plan as it faces the withdrawal of its state guarantee next month. Fritz vom Scheidt at Tricon says: “The relationship with WestLB was very positive and fruitful one. With all businesses there are cycles of growth and change.”

He goes on: “We depend on an advisor to supply the type of analysis and research required to be successful in emerging markets and the trade finance sector. Standard Bank has shown to be extremely good at this.”

Tricon Trade Management Limited (Bermuda) continues as investment manager to the fund. With US$135mn under management in the Islamic shares, it expects the portfolios soon growing to US$200 million or more, as a result of the fund’s steady performance in the highly liquid Islamic finance markets.

“This US$200mn is based on pent-up demand, not forecasts,” says vom Scheidt. “The Islamic world is awash with money.”

The fund expects to relaunch the non-Islamic A shares within a year. The fund’s board felt, says vom Scheidt, that the best way to conform to Bermudan regulations was to dispose of the A shares once WestLB relinquished them. The bank now holds no shares and is fully released.

Standard Bank is not investing in the fund itself and its appointment as advisor has not raised this issue, claims vom Scheidt.

“Forfaiting”, say vom Scheidt and Jim Johnston at Tricon, “is a long-established banking practice of purchasing trade finance payment obligations. The fact that this commercial activity originates from the sale and shipment of essential goods provides it with natural elements for an Islamic investment structure. In addition, such essential goods often command preferred payment, which contributes to excess risk-adjusted returns. The class C shares and class D shares offer a proven alternative investment opportunity in an international trade finance fund within a shari ‘ah compliant structure.”

The class C shares and class D shares for Islamic Trade and Commodity Finance are unrated and open-ended to maintain their ability to derive their investment benefits from all trade finance markets – especially the higher yielding emerging markets.

Tricon Forfaiting Fund is based in Bermuda and registered with the Bermuda Monetary Authority as an institutional mutual fund. Its class C shares and class D shares have been uniquely structured to bring all of the features and investment benefits of forfaiting to Islamic investors within a managed and diversified portfolio.